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The Importance Of A MLM Compensation Plan

Sep 11, 2008
It is very important. In order to get paid a certain amount, the MLM compensation plan shows you how much work you need to do to get paid that amount. Different companies offer different margins and if a company pays a distributor too low, you just may not survive. If it is too high, you may earn a lot but your retail customers will become dissatisfied.

Demotion and maintenance will next be discussed. What is demotion? It means dropping from one MLM position to a lower one or your quota remaining may be increased in order to reach a certain target. Anyone who becomes demoted endures income loss and that can be a source of embarrassment.

Maintenance involves the minimum amount of sales volume a business builder has to buy, either his own personal volume or combined with group sales, in order to keep his rank and be eligible for bonuses. Or...be able to override commission or maintain distributorship. There are three maintenance plans which include, mandatory maintenance, no maintenance and optional maintenance.

The mandatory maintenance is a requirement by the company to have you purchase products on a monthly basis. This works if your organization is large and you have a guaranteed monthly income. The opposite is not good. An individual struggling with his business will feel pressure and it is one of the reasons many drop out of MLM. Some companies may wait until you achieve a certain rank before requiring mandatory maintenance.

Starting your own business or "trying out" a MLM has no pressure with a no maintenance plan. For years an individual can be in a MLM and still maintain the same rank. The disadvantage to this plan is that no maintenance means that no purchase needs to be made by downlines. If the product is in demand though and your downlines have a solid customer support system, then for a start up, this plan is a sure way.

Optional plan is also a good plan for the "newbie" or casual interest in MLM. A certain volume of products is purchased when you want to override your commission from the company. There is no pressure to pay maintenance and money is made. The one big problem is that if your downlines are not producing sales, even in large organizations, this will mean your pay will not be much. Those in the middle will not maintain and a chain reaction is initiated to the upline. A hollow organization is created and the person you are means nothing without an income.
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